BCR, the largest bank on the market, is raising the interest rates on time deposits in RON, stated Dan Bunea, the bank's vice-president in charge of Treasury. He adds "a trend to watch for on the market is the rise in borrowing costs, which is already underway."
Banca Comerciala Romana (BCR) had 32.4% of the market of deposits for individuals by the middle of this year, with the rate increase being the most significant move made in months by the banks that can influence consumer savings behaviour.
The exact raise is to be set by the Assets and Liabilities Board of the Bank today. Increases are expected to differ depending on maturity, and reach up to one percent.
BCR's interest on deposits currently range between 6% for one month to 7.5% for one year, with the rate reaching 8% for the two-year maturity. Interest is higher than the standard rates of its main competitors, BRD and Raiffeisen, but lower than those offered by other powerful banks on the retail market like Banca Transilvania, Bancpost and CEC. BRD, the second-largest bank on the market last month launched six-month deposits with a fixed interest rate of 7.75% a year.
Interest on deposits reverted to positive values in real terms as late as this summer, as a result of the declining inflation, after over one year when time deposits in RON had not generated any real yields, causing a collapse in savings.
As for the borrowing costs Dan Bunea refers to, this trend can already be felt by BCR's clients that have mortgage loans to repay in RON and in euros indexed to benchmark rates like BUBOR and EURIBOR, which have gone up over the last few months. BRD and Banca Romaneasca have recently upped the rates for personal loans in RON by 1%-1.5%.
Beside the increases in interest rates on deposits, BCR is preparing to raise RON from the market by launching a bond issue whose value may go up to 575 million RON (more than 160 million euros).
"We are considering a three, four or maybe five-year maturity and an interest rate that will mostly likely be fixed. The issue price could come with a discount, at 97%-98%," Dan Bunea stated. He adds the money will be used to ensure steady growth of the loan portfolio.
"You cannot fund 15-25 year loans only with one-month deposits," Bunea says.
Next Tuesday, Wednesday and Thursday, the bank will be organising a presentation tour on this issue to investors in Bucharest, Vienna and London. BCR expects to prompt a great deal of interest among foreign investors.
"We may find that the value is too small compared with demand, but we'll adjust it through the interest rate. I believe a significant percentage of subscription will come from foreign and domestic investment funds," Bunea said.
The bonds are to be listed on the Bucharest Stock Exchange. The issue will be organised by BCR Securities, with the bank also backed by Erste Bank, its future majority shareholder. The approximate subscription period will be set for October 20-30. Bunea feels the rate that will be set might seem small to non-institutional Romanian investors, yet to foreigners "the yield may be spectacular" considering the RON's appreciation potential.
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